I need to make it clear I am not a religious believer and
haven’t always seen the Catholic Church as a good thing historically, or the
views on social issues it holds, but I do like some of the things the new Pope
Francis has to say.
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| Thomas Piketty |
The critic, newspaper editor Allister Heath (published in
the NZ Herald June 20th )admires the Pope as a modern religious
leader and for his dedication to abhor war and poverty but he takes exception
to his views on economics and business. The Pope's hostility towards capitalism,
shared by the Church of England, Heath believes is ‘tragically misplaced’.
The Pope according to Heath is far too influenced by the
views of French economist Thomas Piketty the intellectual who ‘obsesses about
inequality and advocates crippling taxation on income and wealth’. Heath sure
doesn’t like Piketty!
The Pope evidently claimed that the ‘absolute autonomy of
markets’ was the ‘new tyranny’ and Heath believes that this is a ‘strangely
inaccurate vignette of the modern economic system, which is characterised by
not so free markets that are routinely bailed out, subsidised, taxed, capped,
fettered, regulated and distorted by activist governments and their monetary
and fiscal policies’.
I am on the Pope's side.
The neo liberal free market ideology
has had its day. Heath seems to be arguing that it hasn’t been given a fair go
– echoing the point of view of the ACT party.
The wealth of the few (the 1%) was supposed to trickle down to the
lowest levels. It seems more have to have trickled up and the ratio of rich to
poor is evidently at the same point as 1929. The Global Financial Crash of 2008
Evidently many leading economists criticized the French
economist – it would seem natural that they would. It was so called ‘leading
economists’ that led us into the Global Financial Crisis of 2008. Their ideas
of privatisation, self-interest, short term gains, anti-union, minimal
regulation and government have created the problems that so worry the Pope. The
rich have got richer and the poor poorer; the social fabric of our societies is
in tatters, the sustainability of
environmental resources at risk and the concept of the common good left
to look after itself.
The Pope stated that ‘inequality is the root of social evil’
According to Heath, ‘in any free society characterised by
private property rights…there will inevitably be a divergence in earning and
wealth’ and the Pope's ‘condemnation of inequality is thus tantamount to a
complete rejection of contemporary economic systems’. Maybe contemporary
economics have had their day and it is time for new thinking. Mrs Thatcher, the
ultimate neo-liberal market forces politician, used to say ‘TINA – there is no
alternative’ - but that was then; times have changed.
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| Mrs Thatcher |
Heath writes that rich people ought to be allowed to keep
all the money they earned and that their wealth provides the rest of us with goods and
services that we should be thankful for. The idea of equalisation through
punitive taxes he sees as an anathema.
If we get in the way of the rich capitalists then Heath
believes this would be catastrophic consequences and would halt human
civilisation. Words you might’ve expected to hear from the rich capitalists
prior to the 1929 crash.
Heath argues that those who buy and sell perform a crucial
and legitimate role. Few would argue with this. I don’t think the Pope is
anti-capitalism more the self-centred version that currently rules the roost. The concept of the common good, of a fair go
for all doesn’t need to be conflict with capitalism. The role of democratic
governments is to ensure all members are cared for but this doesn’t mean
destroying capitalism – it means growing the economic pie and sharing the
profits by means of taxation to ensure all citizens can take part. As it says
on the Inland Revenue Department in USA ‘Taxation is the price we pay for
civilisation’.
Heath didn’t like the Popes criticism of ‘trickle down
economics’ when the Pope said, ‘there was the promise that once the glass had
become full it would overflow and the poor would benefit. But what happens is
that when it is full to the brim, the glass magically grows and nothing ever
comes out for the poor.’
Heath argues that we are all better off than we were in the
past – which is obviously true – but it is equally true that the inequality gap
is growing in countries such as New Zealand.
Heaths answers include boosting entrepreneurship, improving
education and more flexible labour markets but he writes, ‘they certainly do
not involve wholesale, ill-informed attacks on the market economy.’ What about informed criticism?
Religious leaders should evidently keep out of criticizing
the money lenders! ‘Capitalism’ writes Heath, ‘is the greatest alleviator of
poverty ever discovered’ and religious leaders ‘should learn to love the wealth
creating properties of the market economy’. Heath reflects an almost religious
belief in the power of markets!
Not all agree with Heath defence of capitalism. Concerns
about inequality and capture of wealth by a small elite comes from Mark Carney
Governor of the Bank of England, who quoting American philosopher John Rawls,
asks us to imagine what sort of society would you want if you didn’t know into
what circumstances you would be born into? Dog eat dog or one which does the
best for the least well off?
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| Mark Carney Bank of England |
Carney warns that the social contract made up of
relative equality of outcomes, equality of opportunities and fairness across
generations is breaking down adding ‘few would disagree that a society that
provides opportunities for all of its citizens is more likely to thrive than
one that favours an elite.’ I am reminded of a quote from Adam Smith, 'no man ever saw a dog make fair and deliberate exchange of a bone with another dog.'
‘We need to recognise the tensions between pure and free
market capitalism’, writes Carney, ‘which reinforces the primacy of the
individual at the expense of the system and social capital which requires of
individuals a broader sense of responsibility’. Carney’s argument, in
short, is that if financial capitalism
comes to be widely perceived as merely a mechanism by which the rich rip off
the rest of us and capture almost all the gains from economic growth then such capitalism
is at risk.
I think the Pope and the Governor (and Francis Piketty) are
right to be critical of the current obsession with neo-liberal beliefs and to
fight for capitalism with a kinder face. Opportunities for all not for the few;
pure capitalism does not always sit happily with democracy which requires from
individuals a broader sense of responsibility for the community as a whole.
I am with the Pope ( and Piketty and Carney)
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